By Elvira Pollina, Giuseppe Fonte

MILAN, April 22 (Reuters) - A dispute over valuation is complicating Italy's plan to sell PagoPA, which handles digital payments to the public administration, to the state mint and financial conglomerate Poste Italiane PST.MI, two sources close to the matter said.

The prospect of PagoPA changing hands, even though it would remain under state-controlled entities, has alarmed Italy's crowded banking sector, which is grappling with increasing competition in the digital payment business.

Under the plan, state-backed Poste - which over time has expanded beyond its core mail and parcel business into payments, broadband services and energy supply - would retain a minority stake in PagoPA.

But Poste and the mint are questioning a 500 million-euro ($575.30 million) price tag pegged by Treasury adviser KPMG for the Treasury-owned company, the sources told Reuters, asking not to be named.

The mint and Poste have obtained access to PagoPA's financial data for more clarity on its accounts amidst doubts over whether its business plan supports the valuation, the sources said.

The involved parties were not immediately available for comment, or declined to comment.

PagoPA, which this year has handled payments towards Italy's public administration worth 33 billion euros, is set to play a leading role in the Italian government's efforts to set up a digital wallet through the IO app.

The app enables Italians to store both official documents, including proof of their digital identity to access public services online, but also payments.

Italian banks fear Poste could use PagoPA to strengthen its position in the digital payments market as they deal with the increasing presence of tech giants such as Apple AAPL.O Google owner Alphabet GOOGL.O or PayPal PYPL.O.

The ballooning use of stablecoins, which are a type of cryptocurrencies designed to maintain a constant value, is also a factor of concern for European banks as they give people a means of payment for cross-border transactions, without the need for a bank account.

($1 = 0.8691 euros)

(Reporting by Elvira Pollina in Milan and Giuseppe Fonte in Rome; Editing by Sharon Singleton)

((elvira.pollina@thomsonreuters.com;))